US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JP Morgan are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.

The plans proved controversial, with critics charging that the government’s public-private partnership – which provide generous loans to investors – are intended to help banks sell, rather than acquire, troubled securities and loans.

Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.”

The bad news is that the Treasury is still keeping up the charade:

“It’s an open programme designed to get markets going,” a Treasury official said. But he added: “It is between a bank and their supervisor whether they are healthy enough to acquire assets,” raising the possibility regulators may prevent weak banks from becoming buyers.

“That isn’t just lame, it is out and out dishonest. The Treasury can and bloody well ought to rein in this kind of thing, but instead it will fob off its duty to make sure the program works as promised (ie gets bad assets off the balance sheets of banks that NOW own them, as opposed to those who decide to load up on them for fun and profit). But no, they pretend this isn’t a problem of their negligence. More important, it shows very clearly that their first and only loyalties are to the banking industry. The public is a mere goose to be plucked.”

Check out the rest of Yves’ rant.

Finally, Tyler @ ZeroHedge has a nice piece on Charles Bowsher, the chairman of the FHLB resigning over his disgust with the relaxed FASB rules regarding mark-to-market. Go check out the ZeroHedge piece, and ask yourself the key question he quotes from Bloomberg’s Jonathan Weil: “Now the question for taxpayers is this: If Charles Bowsher can’t get comfortable with these banks’ financial statements, why should anybody else be?”

-KD